When it comes to the use of privatized non-educational services, school districts increasingly are opting to keep operations in-house. According to American School & University's 6th Privatization/Contract Services Survey, 21.7% of school districts do not outsource any services, compared to 12.3% in 1997.

Privatization remains a highly charged issue, especially at the school-district level. The use of outsourced services by school districts was on a downward trend prior to an increase reported in 1997, but seems to have resumed its slide. For the purpose of this survey, privatized non-educational services refer to those operations separate from the academic mission of the institution that are turned over to an outside company.

To arrive at the results for this year's report, detailed surveys were sent in April [1999] to a representative sample of 750 chief business officials at public school districts. Among the respondents, more than half represented institutions with enrollments of 1,000-4,999 students.

While more school districts are abandoning privatized services altogether, there is a representative sample that actually is increasing the amount of outsourced services already in place. In 1997, 5.2% of school districts contracted out five or more services; in 1999, 15% do. It seems those that have experimented with outsourcing in a number of areas are more likely to add additional services, while those that test the waters on a smaller scale (outsourcing only one or two services) are more likely to discontinue the practice altogether if unhappy with the results.

Districts with enrollments of more than 2,500 are more likely than smaller institutions to privatize services. This could be due to a number of factors. One that was mentioned time and again by a number of smaller districts is that because of their size, it was difficult to get outside companies interested in providing services. This is often the case in Michigan's Upper Peninsula, where schools are too small to attract the interest of respected contractors.

What Is Being Outsourced?

Historically, certain services are more likely to be privatized than others. Table 1 identifies the percentage of school districts that contract out various types of non-educational services. Among the most common are transportation (30.0%), HVAC maintenance (28.3%), food service (23.3%), office-equipment repair (23.3%), computer servicing (18.3%) and vending (16.7%).

School districts reported increasing their use of privatized services in a number of areas from what was done two years ago. Among the areas of growth include custodial (up 11.5%), HVAC maintenance (up 9%), maintenance (up 3.2%), grounds maintenance (up 2.9%), vending (up 2.7%) and food service (up 2.2%). The largest declines were reported in the outsourcing of transportation (down 10.4%), printing (down 5.8%), and laundry (down 5.3%).

College Capitalizes on Contracting Opportunities

When it comes to outsourcing non-educational services, Robert R. Jones, vice
president of administration and finance for Edison Community College, Fort
Myers, Fla., says he can't think of an area the college hasn't taken advantage
of.

Edison, which educates 14,000 students in approximately 40 buildings on
three campuses, contracts out everything from grounds, security, and
maintenance services to printing, payroll, and food service. It also outsources
management of its performing-arts hall, a practice which provides a number of
benefits while limiting financial risk to the college.

"[Outsourcing] has worked out very well for us," says Jones.

Each of the services has its own particular reason for being privatized,
including benefits in cost, quality, and expertise. Most recently, the college
outsourced its computing services.

"This was done primarily because we could not afford to hire the right
people," says Jones. "Now we can get the expertise we need."

Jones is quick to add that outsourcing may not be for everyone. "We have a
very big network of providers in our area," says Jones. "Outsourcing may not be
the right choice in an area where services are not readily available. They may
not be able to achieve the savings we do. You really have to look at the
environment."

A smaller percentage of school administrators expect their use of privatized services to increase over the next few years compared to what had been reported in past years. Approximately 27% of school districts report they will probably outsource additional non-educational services in the near future (compared to 42% in 1997). Slightly more than 37% of higher-education institutions expect their use of contract services to increase over the next few years (compared to 54% in 1997).

The reasons why institutions privatize services are similar for schools and universities; however, the importance attributed to each varies. For example, school districts' primary reason to outsource services is to save dollars, followed by an attempt to improve operations.

Other reasons school districts privatize non-educational services include saving management time, a contractor's ability to do a better job, and the ability to provide greater accountability.

The belief that turning over operations to an outside service would threaten the jobs of loyal employees is the principal reason why school districts do not embrace the practice. Other reasons include "if they can make a profit, we ought to be able to do it for less"; too expensive; and union contracts make it too difficult.

An educational institution's satisfaction with outsourcing rests heavily with each school's experience in the area. One bad experience can have administrators questioning the decision and if it was worth the political risk. This scenario often results in total abandonment of the practice. A good experience, however, often results in more non-educational services being contracted out, allowing administrators to dedicate more resources to their primary responsibility—education.